Pub properties drain Grand Met resources

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THE SLUMP in pub property prices has caught up with Grand Metropolitan. The food and drinks giant has made a sharp write-down of its investment in Inntrepreneur, owner of the UK's largest estate, of 6,835 outlets.

Some pounds 234m, roughly 11 per cent, has been erased from Inntrepreneur's value. Grand Met's share of that is pounds 117m, taken through revaluation reserves.

Grand Met and Courage, the other joint owner of Inntrepreneur, have also had to inject a combined pounds 64m to avoid breaching bank covenants. They shared pounds 28m in operating losses.

The covenants are locked into a loan to value ratio, whereby debts must not exceed 65 per cent of assets. Inntrepreneur's debt is pounds 1.28bn and the loan ratio falls to 57.5 per cent next September.

David Nash, finance director at Grand Met, said: 'We will be talking to the banks about it (the ratio).' The company said it had no intention of pulling out of Inntrepreneur.

Analysts believe a future capital injection would prove less difficult for Grand Met than for Courage, whose parent company is Foster's, the debt-laden Australian group.

Inntrepreneur was one of several accounting issues that analysts grappled with yesterday as they pored over Grand Met's 'disappointing' results for the year to 30 September.

Profits before tax fell from pounds 950m to pounds 902m, at least pounds 20m adrift of most projections. The shares, which started the year at 440p and have underperformed the market since mid-August, fell to 428p regardless of an 8.4 per cent dividend increase to 12.3p.

Although Grand Met had warned of a fall, the City was surprised by a steep downturn in the final quarter at Green Giant, the US frozen vegetables business that has been hit by bumper harvests. City profit projections for 1992-93 have been lowered slightly to about pounds 980m.

On the accounting side, pension credits fell pounds 7m to pounds 39m - 4.5 per cent of profits - and will dip to between pounds 25m and pounds 30m this year.

While sterling's devaluation is likely to lift earnings at Grand Met, it could reverse the downward movement in gearing - currently 64 per cent. The dollar, if it stays at around dollars 1.55, will be the biggest problem for the balance sheet at Grand Met, described jokingly by Sir Allan Sheppard, chairman, as 'an American company with a large amount of British shareholders'. Some 60 per cent of trading profits come from the US.

Grand Met's IDV subsidiary, now the largest liquor company in the world, was the star performer. Trading profits rose from pounds 454m to pounds 509m, lifting its share of the group total from 42 to 54 per cent.

Despite the difficulty of raising prices, IDV's profit margins fell by less than 1 point to 17.8 per cent. Market shares increased, aided by a good performance from J&B Rare whisky and several new brands such as Jose Cuervo 'Ritas, a ready-mixed tequila-based drink, which sold 1 million cases in the US.

IDV's world share of spirits is now 11.9 per cent, up from 11.3 per cent. The share is broadly based, with 17 brands selling more than 1 million cases each. IDV controls 94 per cent of its distribution, up from 50 per cent in 1985.

Elsewhere, Burger King, the fast food chain, continued to prosper. It has 5,705 outlets in the US, 200 in the UK and 943 in other parts of the world.

Pillsbury, the dough business, performed well, but the Pearle optical business remained in difficulty, running up a loss of pounds 18m against pounds 11m last time.